SICHUAN FACES RETURNING MIGRANT WORKER TIDE

UNCLAS SECTION 01 OF 02 CHENGDU 000071

SENSITIVE
SIPDIS

STATE FOR EAP/CM AND EB

E.O. 12958: N/A
TAGS: ECON ELAB SOCI CH
SUBJECT: SICHUAN FACES RETURNING MIGRANT WORKER TIDE

REF: A) O8 CHENGDU 267 B) FBS20080627234985

CHENGDU 00000071 001.2 OF 002


1.(SBU) This cable contains sensitive but unclassified
information - not for distribution on the internet.




2. (SBU) Summary: A low reliance on exports and spending on
earthquake reconstruction has cushioned the impact of the global
economic slowdown on Southwest China's Sichuan Province,
academics and officials say. Both groups worried about local
unemployment and social instability should a tide of jobless
from among the ten million Sichuanese peasants employed outside
the province return from the coast to engulf Sichuan Province.
Government officials are now confident that Sichuan is
successfully assisting a group of returned laid off Sichuan
province peasant workers. Scholars have doubts both about
official peasant worker unemployment figures and the
effectiveness of the official response to rising peasant worker
unemployment. End summary.



Sichuan Less Dependent, Quake Reconstruction Helps Too

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3. (SBU) Wang Xiaogang of Sichuan's Economic Development
Research Institute said that despite recent increases, exports
still account for under 10 percent of Sichuan's GDP, potentially
lessening the impact of the global financial crisis. Other
scholars said that funds for earthquake reconstruction and
national stimulus money provided by the central government are
also helping cushion the shock. Still, Sichuan has not escaped
unscathed. Chen Jiaze of the Chengdu Academy of Social Sciences
said that the city's GDP fell 12 percent and government revenue
dropped by 20 percent compared with the same period of 2008. An
official at Chengdu's largest urban labor market said that
overall number of job seekers is higher than normal although
fewer jobs are available.



Peasant Migrant Unemployment, Instability Became Top Concerns

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4. (SBU) Sichuan academics have become most concerned not so
much the economic downturn itself as with the "returning tide"
of migrant peasant workers on social stability. Many Sichuan
peasants work in the Yangtze and Pearl River Delta regions on
the coast. In late 2008, Guo Xiaoming of the Sichuan Academy of
Social Sciences (SASS),a provincial government think tank, said
(ref A) that Sichuan provincial officials did not expect a surge
of returning unemployed peasants. A mid-March conversation with
Guo, however, reflected much greater official concern about the
problem. He said that about four million of Sichuan's ten
million peasant workers employed outside the province had
returned home for the Spring Festival in January. Another half
of Sichuan's estimated 20 million peasant workers out of a
total provincial population of 80 million work in Sichuan
province itself, either in their home areas or in Sichuan's
cities.




5. (SBU) The Sichuan Daily, the official paper of the Sichuan
Provincial CPC Committee, on April 18 quoted a late March
provincial report stating that all but 760,000 peasant workers
who had returned for Spring Festival had not left again to find
work outside their home area within Sichuan Province or in
another province. Several scholars warn that official
unemployment numbers are likely too low since it is very hard to
determine whether migrants who went to the coast to find work
actually found a job. A Chengdu official from rural Sichuan
said that numbers of unemployed at a Chengdu labor market are
significantly higher than last year, and earthquake construction
is not providing enough jobs to make up for the difference.
Staff at Heifer International, which has several poverty
alleviation projects throughout rural Sichuan, remarked that
many people who had been outside the province for several years
without returning are now back.



Migrant Peasant Worker Remittances Have Dropped

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6. (SBU) Remittances from peasant migrant workers provide 40 -
45 percent of rural per capita income and up to 70 percent of
cash income in rural Sichuan; the drop in peasant migrant worker
employment has had a strong negative impact. Some scholars
estimate that peasant migrant worker remittances are off by a
third this year. While many returning peasants can go back to
the land, several worry that some of the peasants who have
worked in the city have already transferred the remaining years
of their land contract to others. Guo Xiaoming worries that the
land leasing experiment in Chengdu's rural counties may backfire
if peasants who have pooled their village collectively-owned
lands for lease to an agricultural company suddenly lose their
jobs but are unable to go back to the land.



Worker Retraining, Employment Efforts Falling Short

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7. (SBU) Sichuan Labor and Social Security Bureau (LSSB)
officials discussed several provincial policies to help
unemployed peasant migrants:

-- Working with eastern provinces to reduce unemployed returnee
numbers by providing Sichuan peasant workers with appropriate
training. LSSB officials attended a Guangdong job fair in March
where representatives of 100 Sichuan training centers sought
contracts with Guangdong employers to provide appropriately
trained workers.

-- Subsidizing training for Sichuan unemployed peasant and
helping the unemployed in their job search. Sichuan provincial
and local governments have issued training vouchers to train
300,000 workers since the beginning of 2009. Some scholars
argue that these courses, may which last for only a few weeks,
are too short. Furthermore, government subsidies, if available
(Chengdu has already spent all its voucher funding) do not cover
the entire tuition.

-- Providing loans and other assistance to start a small
business are also being considered. Chen Jiaze said separately
that government has very limited ability to get credit to small
businesses that need it.



Quake Reconstruction: No Silver Bullet for Peasant Unemployment

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8. (SBU) Earthquake reconstruction is a major employer of
peasant workers. The Mianzhu area alone will need 300,000
construction workers for rebuilding over the next two years.
Many of these projects will be awarded through bids and paid for
by the coastal provinces that are partnering with Sichuan
counties (ref B) hardest hit by the earthquake. Wang Xiaogang
of the Sichuan Development Research Institute, however, suspects
that much of the work will go to companies from the assistance
donating provinces that will perhaps bring in their own workers
for some of the construction work. Moreover, some of the
construction work demand skills that Sichuan's unemployed
peasant workers do not have.



Comment: A V-Pattern of Confidence, to Worry, Back to Confidence

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9. (SBU) Sichuan official confidence on the peasant worker
unemployment issue followed a V-pattern of initial confidence in
late 2008, followed by considerable worry in January 2009 that
many unemployed peasant workers might congregate in Sichuan's
cities and cause social instability. By March, confidence had
returned once most peasant workers who had returned home once
again departed to work or seek work in the cities of Sichuan or
other provinces.
COWHIG